Lithium market faces structural supply side issues

Published 31-MAY-2022 15:56 P.M.

2 min read

Macro: Lithium

With the lithium price up almost 500% since January 2021, there’s talk that it could be due for a pullback. The following Bloomberg article doesn’t support that view, however, highlighting the long term structural supply issues faced in the lithium industry.

Read the full article here.

Our key takeaways:

Analysts at Macquarie Group warn of “a perpetual deficit”, while Citigroup has nearly doubled its price forecast for 2022, saying an “extreme” rally could be coming.
The shortage of lithium is so acute that in China the government corralled suppliers and manufacturers to demand “a rational return” to lower prices.
Investment in the electric vehicle (EV) industry has grown faster than any other clean energy sector over the past few years, outstripping even wind and solar power. If battery makers can’t get enough lithium, it could slow the adoption of clean-energy vehicles, making it harder to meet global emissions targets.
Supply issues and high prices have prompted acquisitions and joint ventures from battery makers moving down the supply chain and into the mining sector directly.
Fitch Solutions have also labelled lithium a “strategic mineral,” and warned of “rising government intervention.”

The article is a really good deep dive into the structural issues in the lithium markets. For us, it points to just how important it is for the junior exploration space to make new lithium discoveries to match the exponentially increasing demand for lithium.

Without massive investment in new exploration, we simply don't get enough lithium to be able to catch up with the demand from battery makers.

We hold investments from the exploration stage all the way up to development ready projects in the lithium space. Below is a list of our portfolio companies:

Vulcan Energy Resources (ASX:VUL) - Next Investors Portfolio